Blame the investment bankers for the current rise in oil prices. As commentator Mike Whitney points out, "The whole scam is being
executed by the same carpetbagging scoundrels who engineered the subprime
fiasco. They are using the futures market to recapitalize their flagging balance
sheets after sustaining huge losses in the mortgage-backed securities
boondoggle."

"I've seen this bad
movie before. It's the Enron movie, which hit the West Coast power-markets like
a bomb because the federal government was asleep at the switch. Now it's
happening again with oil prices."
-

Rep. Jay Inslee, D-WA

There is no oil shortage, not
yet at least. The reason oil has skyrocketed to nearly US$140 per barrel is
because of rampant speculation. The peak oil doom-sayers are simply confusing the issue. This is not about shortages or scarcity; it's
about gaming the system to fatten the bottom line. The whole scam is being
executed by the same carpetbagging scoundrels who engineered the subprime
fiasco; the investment bankers.

The Wall Street
Goliaths are using the futures market to recapitalize their flagging balance
sheets after sustaining huge losses in the mortgage-backed securities
boondoggle. That's the whole thing in a nutshell. Now they're on to their next
swindle; distorting the futures market with gargantuan
leveraged bets on food and oil.

MarketWatch summed it up like
this on Monday:

"NEW YORK (MarketWatch)
- Speculators now account for about 70 per cent of all benchmark crude-oil
trading on the New York Mercantile Exchange, up from 37 per cent in 2000,
according to congressional findings cited in a Wall Street Journal report Monday.
The report comes ahead of a House oversight subcommittee hearing slated for
later Monday on Capitol Hill to study the role of financial investors in the
crude futures market. There has been much discussion recently about how big a
role so-called speculators have been playing in the sharp rise in energy
prices, though no consensus has emerged on this point.

"Congress, however, has
grown increasingly concerned over speculative investors' role in the energy
market in comparison with those buying futures contracts to hedge against risk
from price changes. Lawmakers are expected to consider legislation to set
strict limits - or in some cases, an outright ban - on speculative trading in
energy futures in some markets, the Journal reported.

"In 1991, the Commodity
Futures Trading Commission authorized the first exemption from position limits
for swap dealers with no physical commodity exposure, the report said. This
began what Dingell said was 'a process that has enabled investment banks
to accumulate enormous positions in commodity markets,' according to the
report." (MarketWatch)

Over the weekend, Saudi
Arabia's King Abdullah convened an emergency Oil Summit in Jeddah, Saudi Arabia
to deal with the disastrous effects that oil prices were having on the global
economy. Rising prices are responsible for everything from food riots in Haiti
to truckers strikes in Spain, Portugal and France. US
Energy Secretary Samuel Bodman delivered a prepared statement supporting the
Bush administration's position on the issue:

"Market fundamentals
show us that production has not kept pace with growing demand for oil,
resulting in increasing - and increasingly volatile - prices. Even despite
higher global production for oil so far this year, inventories have been drawn
down and current world production (spare) capacity is below historic levels -
at fewer than two million barrels per day."

Baloney.

Demand is not out-pacing
supply. That's a myth started by the people who are profiting by betting up oil
futures; investment bankers. They're
led by their chief defender and former G-Sax scalawag, Henry Paulson.

Consider the remarks of
Philip Davis in a recent post at Seeking Alpha:

"Now we have the Saudi
oil summit this weekend and Saudi Arabia took 1.5M barrels a day off-line since
July of '05 in a series of cuts and is currently producing just over 8Mbd out
of their estimated 10.5Mbd maximum capacity. It is forecast by the EIA that next
year OPEC alone will have over 3Mbd of spare capacity so this would be a
terrible time for global demand to take a nose dive or
there are going to be a lot of idle wells… Should global demand drop another 5
per cent in the next 12 months, we could be looking at 8Mbd less demand than
there was just a year ago.

"As the London Telegraph
points out, not only does OPEC have a current production surplus of 2M barrels
a day but that surplus will rise to 3.5M barrels a day by next year. Also,
non-OPEC production is rising fast with a 1.5Mb gain in non-OPEC production
coming down the pike next year... Iraq, by the way, is no longer included as
OPEC or non-OPEC production, a very clever way to hide 2.4 million barrels of
production by the energy apologists." (Philip Davis,
"The Oil Shortage, and Other fairy Tales" Seeking Alpha).

There's no shortage, no
scarcity. In fact, oil is being deliberately kept off the market to keep prices
high. Consider
this: if supply isn't keeping up with demand then why aren't there any lines at
the gas stations like there were during the '70s?

Because
it's all a fabrication. Prices are up because of speculation; that's all.

Here's what Saudi Arabia's
King Abdullah said on Sunday: "Among other factors behind this unjust
increase in oil prices is the abhorrent acts of speculators seeking to
undermine the market." That's why he called the meeting to begin with. The
King insists that "speculators" have played a key role." (AFP)

Consider
this: if supply isn't keeping up with demand then why aren't there any lines at
the gas stations like there were during the '70s?

How about Kuwait?

The Kuwaiti Oil Minister
Mohammed al-Olaim insisted that "there is enough oil to supply the market... We believe that the market is in equilibrium. The price
is disconnected from fundamentals. It is not a problem of supply. Why would you
have a supply problem when demand is going down". (AP)

Of course, demand goes down
in a recession.

What about Libya?

"We believe speculation
has its impact," the OPEC chief said. Libya may reduce its oil production
because there is more than enough oil in the market, according toOil Minister
Shokri Ghanem. "We may have to cut production... We don't see any need for more oil. There is plenty of oil in the market,''
Ghanem said, commenting on Saudi Arabia's decision. (Bloomberg News)

How about Iraq? Can we at
least count on our brothers in Iraq to maintain the administration's falsehoods
about supply problems?

According to Reuters: Iraq's
Oil Minister Hussain al-Shahristani said, "Any increase in world oil
output would not have a significant impact on record-high crude prices that are
being driven by speculation... Regulations needed to be introduced to stabilize
oil markets. I do not think increasing any amount in the international market
will have a significant impact on the prices. It is up to the stock exchange
and the regulations in the industrialized nations. It is not something OPEC can
contribute to. We did not see any impact on the prices from the Saudi's
previous increase." (Reuters)

Venezuela?

Venezuela Oil Minister Rafael
Ramirez refused to join the weekend conference because "We believe it is
not necessary to increase output... Oil production levels aren't behind the
increase in prices," Ramirez said, adding that soaring oil prices were
caused by 'speculative interest, a falling dollar and global inflation'. (Reuters)

So, are all the oil ministers
lying or is the Bush administration intentionally misleading the public about
supply problems?

It's always easy to point the
finger at Big Oil or "greedy" Arabs for price gouging, but that's not
what's really going on. The Bush administration is colluding with their Wall Street buddies
to fleece the public by inflating another bubble; this
time in commodities.

Congress could end this
charade in a minute by passing legislation that would close the Swaps Loophole
and require steeper margin limits on oil futures. But don't hold your breath.
Wall Street is the biggest contributor to political campaigns
which explains how we got into this pickle to begin with. It also
explains why Congress's public approval rating has shriveled to 12 per cent.

Do Bush and (Ben) Bernanke know
what the banks are up to? Do they know that billions that are being loaned to
the banks via the Fed's "auction facilities" are probably being
diverted into the commodities market and driving up the prices of raw materials
and oil, while pushing the world towards global recession?

You bet they do and they're
probably doing everything in their power to keep the banking system from
buckling beneath the weight of its own massive debts.

"Commodities exchanges
limit the number of positions an investor can take in the market, but Michael
Masters, of Masters Capital Management, says the Commodity Futures Trading
Commission (CFTC) has allowed unlimited speculation in these markets through a
loophole. This so-called swaps loophole exempts investment banks like Goldman
Sachs and Merrill Lynch from reporting requirements and limits on trading
positions that are required of other investors. The loophole allows pension funds to enter into a swap agreement with an investment
bank which can then trade unlimited numbers of the contracts in futures
markets."

"Some experts fault the
CFTC, charged with regulating commodities markets, for allowing such loopholes.
'Congress has provided the CFTC the power to control this unlimited
[speculation]; the law is very specific about establishing position limits,'
says Steve Briese, author of The Commitments of Traders Bible and
CommitmentsOfTraders.org, a site that focuses on US futures markets. 'The
problem is they have abdicated this role.'

"The dramatic surge in energy
prices has helped to spark inflation across the economy and, as others at the
hearing testified, has cut into profits of most in the supply chain. Briese
points to Treasury reports that the the top five users of swap agreements are
investment banks, four of which dominate swap dealing in commodities and commodities
futures: Bank of America, Citigroup, JP Morgan Chase, HSBC North America
Holdings, and Wachovia." (Spiegel Online)

The Bush administration is colluding with their Wall Street buddies
to fleece the public by inflating another bubble; this
time in commodities.

Citing the harmful impacts
record high crude oil prices are having on consumers, US Rep. Bart Stupak
(D-Mich.) introduced a bill to close regulatory loopholes:

"The numbers back this
up: Between Sept 30, 2003, and May 6, 2008, contracts held by traders jumped
from 714,000 to more than three million, a 425 per cent increase. Since 2003,
commodity index speculation has increased 1,900 per cent from an estimated $13
billion to $260 billion invested. Stupak said CFTC data show that in 2000,
physical hedges that airlines and other businesses use to ensure a stable price
for fuel in coming months and actually imply delivery accounted for an estimated
63 per cent of the total futures market, while speculators represented about 37
per cent. "By April 2008, physical hedgers only controlled 29 per cent and
speculators had taken over a whopping 71 per cent of the oil futures
market."

He said 85 per cent of the
futures purchases tied to commodity index speculation comes through swap dealers-investment banks that serve as intermediaries for their
pension fund and sovereign wealth fund customers. One report found that $55
billion of total worldwide commodity trading over 55 days came in as swaps.
"The CFTC has allowed 117 exceptions to swaps. When that many exceptions
are allowed, they are not really subject to oversight. We have a CFTC that's
supposed to be doing its job. I'm not certain that it is," he said.

Another Smoking Gun

On May 20, 2008 Michael
Masters, testified before the Senate Committee on Homeland Security and
Governmental Affairs, on the role that speculation has played in recent
commodity price movements. He said:

"In the popular press the
explanation given most often for rising oil prices is the increased demand for
oil from China. According to the Department Of Energy, annual Chinese demand for petroleum has
increased over the last five years from 1.88 billion barrels to 2.8 billion
barrels, an increase of 920 million barrels. Over the same five-year period,
index speculators demand for petroleum futures has increased by 848 million
barrels. The increase in demand from Index Speculators is almost equal to the
increase in demand from China!"

Masters is right; there is
massive speculation which is distorting the market, but who is responsible?
Clearly, the pension fund managers aren't to blame. After all, the largest US
pension funds, which is the California Public Employees Retirement System
(CalPERS), has only invested about $1.1 billion in commodities swaps contracts.
That's a far-cry from $260 billion. The investment
giants and hedge funds are probably leveraging the money they receive from the
pension funds many times over to increase the size of their bets. Keep in mind,
oil futures can be purchased for a mere $.06 on the dollar; that's a lot of
potential leverage.

Masters again:
"Commodities prices have increased more in the aggregate over the last
five years than at any other time in U.S. history. We have seen commodity price
spikes occur in the past as a result of supply crises, such as during the 1973
Arab Oil Embargo. But today, unlike previous episodes, supply is ample: there
are no lines at the gas pump and there is plenty of food on the shelves. Today,
Index Speculators are pouring billions of dollars into the commodities futures
markets, speculating that commodity prices will increase."

Index Speculators have now
stockpiled, via the futures market, the equivalent of 1.1 billion barrels of
petroleum, effectively adding eight times as much oil to their own stockpile as
the united states has added to the Strategic Petroleum
Reserve over the last five years:

"We calculate that Index
Speculators flooded the markets with $55

billion in just the first 52 trading
days of this year. That's an increase in the dollar value of outstanding
futures contracts of more than $1 billion per trading day.

Doesn't it seem likely that
an increase in demand of this magnitude in the commodities futures markets
could go a long way in explaining the extraordinary commodities price increases
in the beginning of 2008?"

Yes, it does. And it also
explains where billions of dollars from the Fed's "auction
facilities" are going. After all, they're certainly not going into mortgage-backed
securities anymore, and MBS represented nearly 70 per cent of bank revenue. So,
where would a desperate banker turn if his main revenue-stream had dried up and
the corporate bond market was frozen solid?

How about oil futures and
commodities; the only game in town? As the MarketWatch article suggests, oil
prices are inflated by about 70 per cent.

Note: Mike Whitney is a well respected freelance writer living in Washington
state, interested in politics and economics from a libertarian
perspective. He can be reached at fergiewhitney@msn.com.

The Game Is Over. There Won't Be A Rebound Bernanke's Speech: 'It's All China's Fault. Really.' The Great Oil Swindle Bernanke's Next Big Bail Out Plan It's
Time To Dump The Federal Reserve
Henry
Paulson's Wild Ride On The Economic Hindenberg The
Mother Of All Rip-offs The
Bush Bust Of '80: "It's All Downhill From Here, Folks"
George
Bush Delivers The Horse's Head
America's
Teetering Bank System: "Where Did All Our Deposits Go?"
Bush's
'Stimulus' Cash Giveaway
When
All Else Fails, Tell The Truth
Hillary
And Diebold In 2008
Saint
Joe And The Impending Financial Crisis
A
Dollar The Size Of A Postage Stamp
'A
Generalized Meltdown Of Financial Institutions'
For
Whom The Closing Bell Tolls
The
Long Fall
Stock
Market Mayhem And Bush's Moral Swamp The
Big Squeeze
Housing
Flameout: California Falls Into The Sea
It's
Time For The Banks To Face The Hangman The
Era Of Global Financial Instability US
Banks Brace For Storm Surge As Dollar And Credit System Reel
Are The Banks In Trouble?
Stock Market Brushfire: Will There Be A Run On The Banks?
Judgment Week On Wall Street